By Ms. Shobha Karandlaje, Minister of State in the Ministry of Micro, Small and Medium Enterprises and the Ministry of Labour and Employment
The Micro, Small and Medium Enterprises (MSMEs) Development Amendment Bill, 2026, recently passed by both Houses of Parliament, marks a significant step towards strengthening India’s MSME ecosystem. MSMEs have made an important contribution to the country’s development and, over the past few years, have emerged as a major force for growth, employment and exports.
Today, more than 9 crore MSMEs are registered on the Udyam Registration Portal, providing employment to around 40 crore people. The sector contributes approximately 31% to the economy and 50% to exports. MSMEs will have a crucial role in realising the vision of Viksit Bharat, particularly through their contribution to economic growth, employment generation and exports.
The expansion of formal registration is particularly noteworthy. The number of enterprises registered on Udyam has risen from 1.65 crore on April 1, 2023, to more than 9 crore, reflecting a substantial increase in the formalisation of the MSME sector.
Strengthening the MSME classification framework
In 2020, the classification of micro, small and medium enterprises was made more comprehensive by removing the distinction between manufacturing and services. A composite criterion based on investment and turnover was introduced.
Subsequently, in 2025, the investment limits were increased two-and-a-half times to ₹2.5 crore for micro enterprises, ₹25 crore for small enterprises and ₹125 crore for medium enterprises. The corresponding turnover limits were doubled to ₹10 crore, ₹100 crore and ₹500 crore, respectively.
These changes have encouraged enterprises to invest more in capital, expand their businesses, strengthen their operations and adopt modern technologies.
Expanding access to finance
Access to finance remains one of the most important requirements for MSME growth. The Ministry has continuously worked towards improving bank credit and strengthening institutional finance for the sector.
Outstanding credit to MSMEs, which stood at around ₹10 lakh crore in 2014-15, has now increased to more than ₹38.35 lakh crore.
The Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) has also significantly expanded credit support. Credit guarantees provided to micro and small enterprises amounted to around ₹3.14 lakh crore between 2000 and 2022. This increased to more than ₹10.43 lakh crore between 2022-23 and 2025-26.
Under the Prime Minister’s Employment Generation Programme (PMEGP), margin money subsidy of ₹24,903 crore has been provided to approximately 8.34 lakh micro enterprises since 2014-15. These enterprises are estimated to have created employment opportunities for around 75 lakh people, strengthening livelihoods at the grassroots level.
MSMEs gaining greater access to public procurement
The Public Procurement Policy for Micro and Small Enterprises, 2012, requires Central Ministries, Departments and Central Public Sector Enterprises to procure 25% of their annual requirements from micro and small enterprises.
The policy also provides dedicated targets of 3% for women-owned enterprises and 4% for enterprises owned by SC/ST entrepreneurs.
Public procurement from MSMEs has increased substantially. Procurement from micro and small enterprises rose from ₹40,717 crore in 2020-21 to ₹1,15,801 crore in 2025-26, exceeding the 25% target applicable to CPSEs.
Of this, procurement worth ₹3,984 crore was made from SC/ST-owned enterprises, while ₹9,059 crore was sourced from women-owned enterprises.
Tackling delayed payments through TReDS
Delayed payments have traditionally been one of the biggest challenges confronting MSMEs because they affect liquidity and working capital.
The government has therefore promoted the Trade Receivables Discounting System (TReDS), a digital platform regulated by the Reserve Bank of India and launched in 2017.
As of March 2026, MSMEs had received timely payments through invoice discounting worth approximately ₹8.71 lakh crore through TReDS.
The number of MSMEs connected to the platform increased from 34,430 in April 2022 to more than 2.55 lakh by March 2026. Meanwhile, the value of invoice discounting increased from around ₹40,000 crore in 2021-22 to more than ₹3.47 lakh crore in 2025-26.
The expansion of TReDS reflects the government’s focus on improving cash flows and addressing the working-capital requirements of smaller businesses.
Faster dispute resolution
To address delayed-payment disputes, 161 Micro and Small Enterprises Facilitation Councils (MSEFCs) have been established across the country.
The 2026 amendment enables state governments to determine the composition of MSEFCs according to their requirements and facilitates the establishment of additional councils.
The legislation also strengthens mechanisms for dispute resolution through mutual settlement and promotes Online Dispute Resolution (ODR) to enable disputes to be resolved more quickly and cost-effectively.
Supporting women entrepreneurs
Promoting women-led entrepreneurship remains an important priority.
More than 39% of MSMEs registered on the Udyam Portal are owned by women, representing nearly 3.38 crore enterprises.
Under the Credit Guarantee Scheme, guarantee coverage of up to 90% is available for women entrepreneurs, along with a concession of up to 10% in the annual guarantee fee.
Under the Procurement and Marketing Support Scheme, women entrepreneurs receive 100% subsidy for participation in trade fairs, compared with 80% for other entrepreneurs.
PMEGP also provides a subsidy of 35% for women entrepreneurs in rural areas and 25% in urban areas.
Promoting SC/ST entrepreneurship
The development of Scheduled Caste and Scheduled Tribe communities is another important priority.
More than 1.24 crore MSMEs registered on Udyam are owned by SC/ST entrepreneurs.
The National SC-ST Hub Scheme, launched by the Prime Minister in 2016, seeks to strengthen the capabilities of SC/ST entrepreneurs, promote an entrepreneurship culture and increase their participation in the MSME ecosystem.
What the MSME Development Amendment Bill, 2026 changes
The latest amendment seeks to build on these initiatives by addressing existing challenges, improving the administrative framework, promoting ease of doing business and reducing unnecessary compliance difficulties.
Its key provisions include:
- National digital platform: Provision for notifying a free and voluntary national digital platform for MSME registration, along with statutory recognition of MSME classification based on investment and turnover.
- Mandatory TReDS payments for CPSEs: Central Public Sector Enterprises will be required to settle invoices for MSME purchases through TReDS. State governments may adopt similar provisions for their public-sector undertakings.
- Strengthening MSEFCs: State governments will be able to rationalise the composition of MSEFCs and establish additional councils where required.
- Time-bound dispute resolution: A time limit will be prescribed for faster resolution of disputes concerning delayed payments to micro and small enterprises.
- Recovery of settlements: Settlements reached through mediation and arbitral awards will be recoverable as arrears of land revenue.
- Interim payment protection: Courts may direct payment of at least 50% of the awarded amount to MSME suppliers where an application challenging a decree, award or order has remained pending for more than six months.
- Decriminalisation of certain violations: Some offences will be decriminalised, with conviction-based penalties replaced by graded penalties, including warnings for first-time violations.
Building stronger and more competitive MSMEs
The amendments follow extensive consultations with stakeholders and detailed examination of issues affecting the sector.
A strong MSME ecosystem is essential for creating inclusive, sustainable and employment-oriented economic growth. By improving access to finance, strengthening payment mechanisms, reducing compliance burdens and making dispute resolution faster, the reforms seek to create an environment in which enterprises can formalise, expand and become more competitive.
The MSME sector will remain central to India’s journey towards Viksit Bharat 2047. With the right policy support and institutional framework, India’s millions of small businesses can evolve into stronger enterprises and emerge as champions of growth, employment and exports.
The author is the Minister of State in the Ministry of Micro, Small and Medium Enterprises and the Ministry of Labour and Employment.
